Monthly Archives

March 2022

The Ups and Downs of Spring Statement 2022

National Insurance Contributions (NICs)
Despite lobbying to delay the upcoming 1.25% increase in NICs payable by employees, employers and the self-employed, the government has decided to go ahead as planned from April 2022, to provide additional funds for health and social care.

Increase in the starting NIC threshold for individuals

The annual level at which employees and the self-employed start to pay NICs was due to increase from £9,568 to £9,880 from 6 April 2022. This increase will go ahead but be further uplifted to £12,570 from 6 July 2022, effectively aligning the point at which an individual starts to pay NICs with the £12,570 income tax personal allowance. In the tax year to 5 April 2023, this is a NIC cut worth £267 for most employees and £207 for most self-employed individuals.

Class 2 NIC liabilities of the self-employed
For the self-employed, some individuals will find that they no longer need to pay Class 2 NICs from April 2022. The small profits threshold will be set at £6,725 as planned but the requirement to pay Class 2 NIC will only apply to those with self-employed profits over £11,908. This will benefit approximately 500,000 self-employed individuals by saving them £165 a year.

  • From 6 April 2023, Class 2 NIC will only be payable by those with profits over £12,570.

Income Tax
The Chancellor has committed to reduce the basic rate of income tax from 20% to 19%, but not until 6 April 2024. It is estimated that this will save 30 million individuals an average of £175 per year.

VAT Rates in the Leisure and Hospitality Sector
No extension has been granted to the leisure and hospitality sector for use of the reduced 12.5% VAT rate on eligible supplies including food, non-alcoholic beverages and hotel and holiday accommodation. The VAT rate applied to these supplies will revert to 20% from 1 April 2022 as planned.

Fuel Duty
Fuel duty has been cut by 5p per litre for 12 months from 6pm on 23 March 2022. The Treasury report that this will save the average car driver £100 a year and the average van driver £200 a year.

Bonds – between a rock and a hard place

Sometimes as an investor we come face to face with a stark reality.  Today, that is the case with the bonds held in portfolios. By and large, most long-term investors own bonds because they do not have the emotional or financial capacity to suffer material falls in the value of their portfolio. By and large, high quality bonds have done the job asked of them delivering protection from the large equity market falls in 2000-2003, 2007-2009 and Q1 2020.  The return penalty of giving up equities to own bonds has been softened to some extent by positive returns in the past.

In December 1981 the yield on 5 year UK gilts stood at 15.5%.  What would investors give today for such yields! The next 40 years proved to be good for bond holders as governments around the world got a grip on inflation and yields fell, delivering capital gains (bond prices rise as yields fall and vice versa) on top of the income delivered in the form of bond coupons (interest payments). Gilt yields fell from these lofty heights to a low of -0.06% in December 2020. Today, 5 year gilts yields have risen to around 1% (before inflation), which has resulted in small capital losses.

With current levels of inflation being well above the Bank of England’s target rate of 2%, bond (and bank deposit) holders face the real risk of the erosion of their purchasing power.  In the presence of low yields well below inflation, and with the risk of rising yields – although no-one knows where yields will go from here – bonds seem unattractive from a return perspective going forwards.

So what’s to be done?
Investors have to ask themselves a tough question: ‘If I cannot cope emotionally or financially with suffering large equity market falls, what could I own instead if I abandon my high quality bonds’. Some investors have chased bonds with higher yields such as those issued by weak companies (high yield bonds) or those of emerging economies (including Russia), but this simply adds equity-like risk into the portfolio and dramatically reduces the defensive qualities of owning bonds.  During the equity market falls of the Credit Crisis of 2007-2009 global high yield bonds fell by around 20% and during the Covid-induced fall in Q1 2020 they fell by around 15%[1].

High cost, opaque and highly complex, absolute return strategies, relying on manager skill alone, have hardly lived up to their name.  Their sector average return during the equity market fall of Q1 2020 was down 8% or so[2].

The stark reality is that there are no easy answers, but there are a few useful points to remember:

  • The return give-up of owning high quality bonds over equities should be thought of as an insurance premium. Today that premium is high. That is how the market is pricing it.  Pay the premium or surrender the policy.
  • Own bonds in your portfolio to a level that satisfies your emotional and financial ability to suffer equity market falls and no more. This is something that your adviser can talk you through. How much insurance cover do you need?
  • High-quality bonds still have the ability to provide down-side protection and portfolio liquidity; two qualities not to be sniffed at.
  • Accept slim pickings from bonds given such low yields and in the face of inflation. There is nothing you can do about it.
  • Accept that there are no easy alternatives. All carry material trade-offs and risks.
  • Think of your investment pot in its entirety and avoid the trap of focusing in on one line on your portfolio valuation and pointing an accusing finger at your bonds.
  • Don’t get caught up with trying to second guess whether high quality, short-dated bonds or cash are likely to be the better option over the short or longer term. No-one knows and, when compared to the high volatility that equity markets exhibit, the two are pretty similar.

Figure 1: Compared to equities, high quality short-dated bonds and cash are quite similar

Data source: IA Standard Money Market sector average – IA, iShares Core MSCI World UCITS ETF Acc. GBP in GB, iShares UK Gilts 0-5yr UCITS ETF 0 5 GBP TR in GB – iShares.

It is never comfortable confronting a tough reality but understanding that reality and recognising that the alternatives are limited, can help you to deal with it in a rational way.

If you have any questions, thoughts or actions relating to the content of this article please get in touch with us by calling us on 028 9099 6948 or by emailing

Risk warnings

This article is distributed for educational purposes and should not be considered investment advice or an offer of any security for sale. This article contains the opinions of the author but not necessarily the Firm and does not represent a recommendation of any particular security, strategy, or investment product.  Information contained herein has been obtained from sources believed to be reliable but is not guaranteed.

Past performance is not indicative of future results and no representation is made that the stated results will be replicated.

[1] IA Global High Yield Bond sector average

[2] IA Targeted Absolute Return sector average.

Spare Room to Stellar: The OutsideIn Story

Pacem is delighted to continue its support of an initiative entitled ‘Spare Room to Stellar‘, alongside Belfast City Council and Danske Bank. Spare room to stellar is designed to inspire and equip Belfast entrepreneurs to start and grow a business. It does this by firstly sharing the stories and lessons of businesses that started in a spare room in Belfast and have gone on to compete, and win, on a global scale.

The first film released in the 2022 series is that of David Johnston and OutsideIn.

David Johnston of OutsideIn says: “I started off with nothing but a vision and a passion to help those less fortunate. OutsideIn is now a one of the UK’s fastest growing streetwear brands and through our ‘wear one share one’ model, every time a customer purchases an item, an additional item is given to someone experiencing homelessness.

“If sharing my story inspires others to give their business idea a go, I’ll be delighted. Taking a small idea and growing it is what the Spare Room to Stellar resource is all about. After all, I started my business in my mum’s spare room too!  There’s fantastic support available for people starting out on their own in business – and we want to see more people getting out there and giving it a shot.”

In the coming weeks, people will also hear how Lynsey Bennett, co-founder of Lusso tan started her ever-expanding, revolutionary tanning brand providing inspiration and tips for early-stage businesses and entrepreneurs alike.

Watch the highs, lows, habits and how-tos of starting/growing a business from humble beginnings. Sit back, enjoy and then act on your idea or early venture by booking a signposting consultation over at 

You can watch the OutsideIn story here: